Some options strategies, however, better balance the risks and rewards of trading on corporate wrecks.

Robert Bodnar, options strategist for Morgan Stanley's Global Wealth Management division, likes selling cash-secured puts -- either at- or out-of-the-money put sales -- because the risk is minimal due to the small amount of money needed to implement the trade. Moreover, implied volatility for these special stocks is exceedingly high, reflecting the options market's doubts about their future viability,

Investors who want to bet the U.S. government will rescue GM from near-certain bankruptcy can consider the cash-secured sale of GM's January 2.50 puts that expire in 2011.

GM's put options are trading at stratospheric prices, though volatility has started to decline, perhaps in anticipation of a bailout, as a major U.S. car maker has never filed for bankruptcy protection.

Even though the stock is only $4.75, the risk/reward tradeoff is better in the options market. For about 50 cents (strike price minus the options premium), investors could realize a 400% return if GM doesn't go out of business. But if GM trades at or above $2.50 at expiration, investors keep a $2-per-share premium on a 50-cent investment, though they would lose 50 cents if the company declares bankruptcy.

With GM's stock down 92% in the past five years, options traders were, until recently, ready to bet GM was as good as dead. The most widely held GM options are the January 10 put expiring in 2009 and the January 10 put that expires in 2010. Traders say GM's options indicate the stock could trade between zero and $1.

GM's trading tenor has changed recently. Some investors are interpreting Uncle Sam's decision to bail out Citigroup, and take over its mountain of toxic assets, as a signal Washington may help auto makers.

After flying to Washington in their private jets to ask Congress for help, the auto makers' chief executives were sent back to Detroit with a homework assignment. Congressional leaders told them to submit business plans that show their companies can be viable. The plans are expected to be submitted by Dec. 2. Congressional hearings are expected Dec. 5.

Ultimately, Washington may have little choice because the failure of GM, Ford, and Chrysler could further harm the U.S. economy, which already may be in recession.